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Debit Card Vs Credit Card. Which Is Better?

IamCheated.com Research Team | July 20, 2018  6:55:pm

Debit cards and credit cards have become an integral part of our day to day activities and we can't imagine life without them. It has made our lives easy as we do not have to carry cash around. Still, there is confusion among many people, regarding which one is better, debit or credit card. In this blog, we will discuss various advantages and disadvantages of the credit and debit card.

Advantages of Debit Cards

A debit card is issued by banks for an account you have opened with them. It may be either savings bank account or current account. These are the various advantages of a debit card.

1. Controlled spending

The debit card helps you spend in a controlled manner, as you can swipe your card, only if there is money in your savings and current bank account. Not every bank provides an overdraft facility on Debit Cards.

2. Interest-free

There is no headache of paying interest in case of the debit card, as money is only debited from your bank account. 

3. Limited liability from theft

In the case of a debit card, there is a limit on the amount a cardholder can withdraw. So there is a limited liability from theft.

4. Fees

Charges involved in using a debit card are very low when compared to a credit card.

Disadvantages of debit card

1. Does not help build a credit score

If you do not have a credit history, spending money with your debit card will not help you build a credit score. It is always good to have a credit history when you apply for a big-ticket loan.

2. Low reward points

Reward points offered by the bank on your debit card are less when compared to credit cards. Also, you will not be given any reward points for making daily transactions with your debit card.

Advantages of Credit Cards

Even though credit cards and the debit cards looks similar, there are many differences between them. In case of debit or ATM cards, you need to have an account with the bank. But, in the case of credit cards, it is not mandatory to have an account with the bank. You can avail a credit card from any financial institution which issues these cards. These are the advantages of a credit card.

1. Helps to build your credit score

Using your credit card more frequently will help improve your credit score. But, you have to pay all your credit card bills in time. Every bill payment made on your credit card will be reported to credit information companies like CIBIL.

2. Reward points

To promote the regular use of a credit card, banks, and credit card companies offer you attractive reward points and cashbacks if you make purchases with your credit card. You can redeem reward points later.

3. Easy EMI facility

Credit card helps you convert big-ticket purchases into affordable EMIs. Tenure of such EMIs are in the range of 3 months, 6 months, 9 months and 12 months.

Disadvantages of credit card

1. Leads to overspending

As credit cards allow you to spend now and pay later, this might lead to overspending. If you have a credit card, you tend to shop more than required.

2.  Charges

There are a lot of charges on the credit card such as joining and annual fees, late payment charges, charges on cash withdrawals and charges in case you cross the credit limit.

3. Impact on credit score

You have to pay your credit card bills on time. In case you miss paying your bills, your credit score will be badly affected.

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